The dollar is climbing strongly against currencies, Pound is trading lower, and traders are waiting for the Non-Farm Payrolls report today
The Dollar Index (USD/DXY) jumped past the 95.00 resistance level, ending up 0.54% at 95.17. US Jobless Claims remained at 40-year lows and, coupled with Wednesday’s strong ADP Private Jobs increase, auger well for a healthy Payrolls gain later today. Sterling slumped after the BOE raised rates to 0.75% as expected. Mark Carney was cautious about any future rate hikes.
Outlook: Trading was a tale of two halves yesterday. The Asian and European sentiment was weighed by China’s response to Trump’s proposed tariffs. While China left the door open to further negotiations, they pledged to fight back.
Wall Street brushed off trade worries after Apple’s market value hit US$ 1 trillion and led tech shares up. The Dollar followed stocks up buoyed by the low US Jobless Claims number.
Trading View: The Dollar Index ended on a firm note heading into today’s July Payrolls number, expecting to be around +190,000. The Unemployment rate is expected to fall to 3.9% from 4.0%. Wages (Average Weekly Earnings) are expected in increase in July to 0.3% (0.2%). Once again, markets are all bulled-up on the Greenback ahead of the numbers. Be wary of a buy the rumor, sell the fact scenario.
There are a lot of other major data releases today but its Payrolls that matter.
Global yields were lower. The yield on the US 10-year bond slipped to 2.99% from 3.01% yesterday.
Japan’s 10-years JGB slipped one basis point to 0.11%. UK 10-year Gilts were unchanged at 1.38% following the BOE rate hike. While global yields all slipped, the US 10-year will need to keep above the 3.0% level for the Greenback to gain more significant ground.
Trade war fears continue to weigh on sentiment. While tech stocks rose, commodity shares were whacked. The Dollar soared 1.7% against the South African Rand (USD/ZAR) while other EM currencies weakened. The USD/CNH (offshore Chinese Yuan) rocketed to highs last seen in May 2017. Market positioning continues to be a headwind for the Dollar with bullish bets at their largest since January 2017.
USD/DXY – The Dollar Index rallied past the strong resistance at 95.00 to close at 95.17, up 0.54%. The overnight high traded was 95.19 and immediate resistance lies just above at the 95.20 level. The next level of resistance can be found at the 95.50 level which is strong (last traded on July 20). Immediate support comes in at 95.00 and then 94.80. Likely range today 94.80-95.30. Prefer to sell rallies.
GBP/USD – slumped to fresh two-week lows at 1.3012 following the expected BOE rate hike. The British Pound had an initial rally to 1.3129 immediately after rate hike with the vote 9-0-0 unanimously in favor of a hike. However, the rise was short-lived, and Sterling resumed its downtrend. Bank of England Governor Mark Carney said that the rate increase was to temper growing price pressures and another rate hike was possible next year in May. Which is a long time for markets? Brexit’s final date is in March 2019 and overshadowed any BOE tightening bias. The overall stronger Dollar also weighed on Sterling. Immediate support lies at 1.3000/10. The next support level can be found at 1.2980 and then 1.2950. Immediate resistance for Sterling lies at 1.3040 and then 1.3070. Likely range today 1.3000-1.3100. Prefer to buy dips, the speculative community is currently short of Pounds.
AUD/USD – fell under the weight of weaker commodities and a stronger US Dollar. The Aussie closed at 0.7365, 10 points above its overnight low. Immediate support lies at 0.7355 and then 0.7330. Overnight high traded was 0.74113. Immediate resistance can be found at 0.7380 and then 0.7400. Today sees the release of Australian July Retail Sales which, if outside expectations, could move the Aussie. Copper prices slipped 0.47% last night. Prices have been falling since May 2018 and have not seen a significant bounce. The speculative community is currently short AUD contracts which should provide some support. Likely range today 0.7355-0.7405. Prefer to buy dips.
USD/JPY – ended little-changed at 111.67 (111.73 yesterday). Cautious risk sentiment kept a lid on the Dollar while Japanese yields stayed near their highs (10-year at 0.11%). USD/JPY traded to an overnight high of 111.737. Immediate resistance can be found at 111.75/80 and then 112.00. Immediate support lies at 111.30/40 and then 111.00. Overnight low traded was 111.318. With the speculative community currently short JPY bets plus the trade angst in the marketplace, prefer to sell USD/JPY rallies. Today’s likely range 111.10-111.80.
EUR/USD – weakened to1.1586 at the New York close, down 0.68%. The yield on Germany’s 10-year Bund slipped to 0.46%. The wide differential between US and German and European yields will keep the Euro-heavy. That said, we have not broken through the 1.1540 and 1.1750 range now for almost 6 weeks now. Overnight high for the Euro was 1.16676. Immediate resistance on the day comes in at 1.1610 and then 1.1640. The overnight low traded was 1.15817. Immediate support lies at 1.1580 and then 1.1550. Likely range today 1.1580-1.1630. Prefer to buy dips at these levels, can’t see that wider range changing just yet.
USD/ZAR – The rand headed for its worst drop against the dollar in two weeks as a hawkish Federal Reserve and escalating trade tensions weighed on emerging-market currencies.
A day after the Fed’s upbeat assessment of the US economy drove the dollar and Treasury yields higher at the expense of developing-nation asset prices, China further rattled investors by vowing to retaliate against President Donald Trump’s latest trade salvo.
The currency fell as much as 2.2%, the most in emerging markets, and traded 1.8% down at R13.4528 to the US dollar by 13:24 in Johannesburg, its weakest level since July 23 on a closing basis. Yields on benchmark government bonds due December 2026 climbed nine basis points to 8.7%.
Events and economic events: BOJ Meeting Minutes; Australian July Retail Sales; China Caixin Services PMI; Swiss July CPI; Spanish, French, Italian and German Services PMI; UK Services PMI; Euro-Zone July Retail Sales; Canadian Trade Balance; US July Non-Farms Payrolls, Unemployment Rate, Average Hourly Earnings, Trade Balance, ISM Non-Manufacturing PMI
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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.
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